This kind of depends on how you use your computer.
I'd suggest keeping the OS installed on the 160GB drive and use the 500GB drive for all of your data. You can also configure your OS so that the page file is on the data drive instead of the OS drive. If you're short on RAM this can help boost performance. If you're just using your computer for email and web browsing, you won't see a significant boost.
More than likely both drives are 7,200 RPM. If they weren't, you'd probably know. But if your current 160GB drive is 4,800 RPM, then there would be a noticeable difference in putting your OS on the new drive.